Mr. Brown:
Many small merchants experience multiple pain points when it comes to paying
and filing their sales tax. There are over 6 million small merchants in the
United States yet no one before DAVO has really offered them any assistance
or has provided them with an automated process to relieve them of the burden
of paying and filing sales tax. DAVO Technologies developed a patented
application that automatically impounds, files and pays merchant sales tax.
Boarding is simple; it takes a couple of minutes, and once they do that,
they are essentially done with their sales tax problems forever. Our goal is
to do for sales tax what ADP and Paychex have done for payroll.

CEOCFO:
Why has this not been done before—what are the challenges and how have you
been able to overcome them?

Mr. Brown:
There are a limited number of companies in the accounting space that offer
somewhat of a technological solution on the filing and tax complexity side
for generally, mid-sized to large merchants. DAVO Technologies focuses on
the problem of the payment of the sales tax —having the funds available;
cash management. Many small and mid-sized merchants are challenged by having
the funds available come time to pay. DAVO Technologies is really a
technology company in the payment space with a sales tax solution for small
and mid-sized merchants. Our approach comes from the payments side as
opposed to the accounting and tax complexity side. We basically automated
the manual process that small and mid-sized merchants go through in paying
and filing their sales tax.

CEOCFO:
Why is paying sales tax so difficult?

Mr. Brown:
The expression that we use is, “Merchants collect pennies, and then they
have to pay dollars.” For example, let’s say you are a coffee shop owner and
you are selling cups of coffee at $2 a pop. You are collecting in the state
of New York not just $2.00 but $2.18. The 18 cents is the sales tax. Well,
you sell hundreds of cups a day collecting pennies all the time. All of a
sudden comes tax payment time and you owe the state of New York something
like six or seven thousand dollars. Again, the merchants were collecting
pennies, now they are paying dollars. Many just do not have the funds
available because they used the money for other operating expenses; for
example, in a restaurant they may end up using those funds to repair a
refrigerator. They are going to prioritize that rather than close down
their business. They are going to use the money they have available.
However, some of that money is not theirs, and therein lies the problem:
because the states deem the sales tax money to always be theirs, meaning you
are not allowed to legally use it for anything other than earning interest.
When a merchant is late with their payment, they generally incur a state
imposed penalty which often averages around 10% of what they owe, and that
is immediate. If the merchant does not follow up with payment in a timely
fashion that could lead to closure of the business, inventory confiscation
and in some cases even jail time.

Our patented
solution ties together all the moving parts of the payments ecosystem, from
the point of sale, to the acquirer or processor, to the ACH platforms and to
the States’ Department of Revenue. We integrate with the merchant’s point of
sale or back end accounting package and automatically collect summary data
on a daily basis and then orchestrate an automated impound of the exact
amount of sales tax that a merchant collects on a daily basis. We impound
the sales tax money daily, setting it aside in a safe and secure tax holding
account for further credit to the state. Therefore, this leads to optimal
merchant cash management. We remove the risk from the merchant of
inadvertently using the state’s money for operating expenses.

CEOCFO:
Are there any protections for companies’ funds?

Mr. Brown:
It is very much like payroll. There are many small payroll companies in this
country in addition to the larger ones like ADP and Paychex. They impound
the payroll money and they are safe holding the funds for the benefit of the
government. They safeguard these accounts through insurance and through
their own self-regulation and reputation. DAVO Technologies has multiple
layers of insurance of course and there are safeguards on the account as to
where those funds are actually credited and we have also registered
ourselves with various states.

CEOCFO:
How are you able to account for local taxes?

Mr. Brown:
We collect the sales tax that is dictated to us—that comes out of the
merchant’s point of sale or back end accounting packages. It is all built
in. For example, a merchant’s sales tax in New York City is 8.85% and that
is broken down between city tax and state tax. We take the total tax amount
into the system that point of sale tells us to collect, which has all the
components in it, and each state has their own mechanism to actually divvy
up those funds, trickling down into the different localities. We make one
payment to the state and it is the state’s responsibility to divide that
money to the various locals. DAVO accounts for and collects the total amount
of sales tax due from the state level down to its localities.

CEOCFO:
Have businesses been looking for a better way; are they excited when they
find out that DAVO Technologies exists?

Mr. Brown:
They are excited when they find out it exists because no one has given them
the option of having that solution before. They had to pay their sales tax
on monthly or quarterly basis and it was a pain point for them for all
different reasons—for some it is the filing but for many it is having the
funds available. When our sales reps tell their merchants that we have a
sales tax solution for them that takes 2 to 3 minutes to board with a cost
of only $40 a month or less, which is less than the cost of an accountant or
a bookkeeper, they get excited. We have received some great testimonials.
Merchants have offered to be spokespeople for DAVO for free because they
love the product so much—being able to wipe their hands of this problem and
not having to think of sales tax ever again.

CEOCFO:
How else do you reach out?

Mr. Brown:
Right now, we have two go to market strategies. Our initial strategy is via
subscription, so 90% of our sales effort is being done by channel partners.
We initially launched with First Data in February. We are an app on the
Clover Marketplace and we are also an app on Revel Systems, another very
strong POS platform. Our plan is to be on multiple POS systems. The sales
effort is from the acquirers or processors, POS companies, and small to
mid-sized payroll companies that have a great cross-selling synergy with
DAVO. Our direct selling effort is 10% of our sales effort where we direct
our efforts towards verticals that we think are proven to need the DAVO
solution. It is interesting, you would imagine that food and beverage would
be a large component of our business leads, and they are. However, certain
merchant groups keep signing up on a daily basis. We get an inordinate
amount of BBQ restaurants and also VAPE lounge and storefronts because they
have sales tax challenges. Our go to market strategy in the future is our
state white labeling effort. We would have states white-label our product as
a small merchant sales tax solution. They would roll the product out
voluntarily to all the small merchants in the state free of charge; the
states would become our clients. Merchants would no longer have to file or
execute payment of their sales tax ever again because DAVO would do that for
them. In return, the states would take their sales tax dollars on a daily
basis. This is the key. The same way that DAVO impounds the sales tax daily,
we can pay the states their money daily. This is a very powerful proposition
for states to help strengthen their fiscal situations. For most states,
sales tax is on average, up to 50% of their state budget, so we believe that
it would be a very strong proposition for them to be able to receive that
money daily. In addition, of course, any merchant that is on the DAVO
platform, the compliance rate would go way up. I think it is 28 out of 46
states in this country that collect sales tax offer a discount for on-time
filing and payment. This is not a very high hurdle. Any merchant on DAVO
would automatically become compliant and would receive their discount
because they would always file and pay on time.

CEOCFO:
What is your plan for getting there?

Mr. Brown:
There are two ways. One is from the top down. We are cultivating
relationships with certain governors or lieutenant governors or heads of the
budget committee of the legislature—those that could take credit for either
earning money for the state or saving money for the state. At the same time,
we are having conversations with certain merchants who are already having
problems and are in arrears. We can help them work out an arrangement with
the state department of revenue; a plan where they would go on the DAVO
platform and DAVO would not only collect their current sales tax for the
state but also their back tax in exactly the same seamless, automatic
fashion. We would impound three to five percent of their gross revenue on a
daily basis and remove that the same way we would with current sales tax
impound. That would be placed in a separate account for the state—the state
would always know that they are getting their money. This way, you are
making good citizens out of merchants who were in arrears and it is a very
politically palatable solution because there is no need for collection
agencies, closing businesses down or putting people in jail. It is a
win-win, and it is our way of going in from the bottom up; getting a few
states involved in our automated back tax collection solution. We are
members of the National Association of State Treasurers. We are in contact
with various state treasurers and we have cultivated some relationships at
the top. All you really need is one state. One who recognizes the value of
DAVO’s solution to advocate the process. We would start with a beta. Here
are 50 merchants that are in arrears—let’s show you what we can do. You gain
their confidence by helping them with back tax. And ultimately if you can
get one state to advocate and white label voluntarily, no legislation
involved, it is successful. The compliance rates go up and they are getting
their money on a daily basis. You do not have to get 46 states; you have to
get 2 states. The rest would most probably want the same. We are highly
confident that we can accomplish this. We would like to think that we will
be in beta by 2017.

CEOCFO: We
noticed that DAVO Technologies participated at Finovate; what was the
reception?

Mr. Brown:
We really liked the conference. We thought it was very professionally run
and the participants are world-class startups so we were quite honored to
have been chosen to present with that group. The audience was of the highest
caliber. After the presentation we had a number of individuals approach us
who really impressed us. We were also impressed with the quality of the
reception and the questions we received at our booth. We believe some good
partnerships may come from this event.

CEOCFO:
What would people remember when they are reading about DAVO Technologies?

Mr. Brown:
We are a solutions company. DAVO Sales Tax is just one such solution.
However, DAVO is so much more than just the sales tax solution. We
actually optimize any recurring payment cycle of 30, 60, 90 days, reducing
it to only one day, compressing time. Multiple iterations and uses for this
solution include franchise royalty and advertising fee payments, merchant
utility bills and even facilitating the merchant loan process, given our
access to robust, granular daily sales data that lenders can utilize for
credit decisions.

“DAVO Technologies’ premier product, DAVO Sales Tax is the automated
sales tax solution for the more than 6 million small to mid-sized brick and
mortar merchants in the U.S. and the States alike. Sales tax accounts for on
average, up to 50% of most State budgets, yet nobody before DAVO has
developed a process to collect it in an automatic, seamless and secure
process. DAVO Sales Tax automatically collects, files and pays a merchant’s
sales tax using the merchant’s point of sale and the electronic payments
networks, reducing the risks and liabilities for merchants and states.
DAVO’s goal is to do for sales tax what ADP and Paychex did for payroll.” -
Owen Brown

disclaimersAny reproduction or further distribution of this
article without the express written consent of CEOCFOinterviews.com is prohibited.

Sales Tax Solutions, DAVO Technologies,
Technology Companies, CEO Interviews 2015, Owen Brown, Sales Tax Solution for
Merchants that Automatically Impounds, Files and Pays the Sales Tax, sales
tax payment solution, automated process for small and mid-sized merchants
paying and filing their sales tax, the DAVO Technologies patented solution
ties together all the moving parts of the payments ecosystem, from the point
of sale, to the acquirer or processor, to the ACH platforms and to the
States’ Department of Revenue, Recent CEO Interviews, Sales tax payment
solution that integrates with the merchant’s point of sale or back end
accounting package and automatically collect summary data on a daily basis
and then orchestrate an automated impound of the exact amount of sales tax
that a merchant collects on a daily basis, remove the risk from the merchant
of inadvertently using the state’s money for operating expenses, DAVO
Technologies Press Releases, News, Tech Stock, Companies
looking for venture capital, Angel Investors, private companies looking for
investors, business services companies seeking investors, sales tax payment
solutions companies needing investment capital

ceocfointerviews.com does not purchase or
make
recommendation on stocks based on the interviews published.